Rivalry Corp.

Good morning, ladies and gentlemen, and welcome to the Rivalry Corps Second Quarter 2023 Financial Results Conference. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Tuesday, August 29, 2020. I'd now like to turn the conference over to John Vinson. Please go ahead.

Thank you, Operator, and good morning, everyone. Our speakers on today's call will be Stephen Saltz, Co-Founder and Chief Executive Officer of Ravelry Corp., and Keita Corey, Chief Financial Officer. Before we begin, I would like to remind listeners that certain statements made during this conference call presentation may constitute forward-looking information and forward-looking statements within the meaning of applicable securities laws. These statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of Rivalry Corp. and its subsidiary entities or the industry in which it operates to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. When used in this conference call presentation, such statements use words such as may, will, expect, believe, plan, and other similar terminology. These statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of this presentation. These statements involve known and unknown risks, uncertainties, and other factors, including those risk factors identified in the company's annual information form dated May 1, 2023 under the heading risk factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, other than as required under securities legislation. I'd now like to turn the call over to Stephen Saltz. Stephen?

Thank you, John, and thank you, everyone, for joining us today. Q2 represented another successful quarter for rivalry consisting of continued product innovation, brand maturity, and growth. Our betting handle grew nearly three-fold from the previous year. Revenue was $8.5 million, a 60% year-over-year increase in all-time record for the second quarter. Gross profit increased by 86% year-over-year to $3.8 million. An increased marketing sophistication and brand resonance was notable in the quarter, given our ability to achieve this quarter's year-over-year growth rates while decreasing marketing spend by 6% year-over-year. Despite that decreased absolute spend, we acquired 44% more new customers at a 41% lower cost of customer acquisition in Q2 of this year versus last. Additionally, enhancements to our core product led to operational improvements, driving increased player wallet share and platform engagement with average betting handle per customer increasing 63% year-over-year, positioning us well in the coming quarters. Generally, we believe this validates that our product roadmap is delivering increased customer value, and we expect it to continue doing so. In terms of innovation, we've delivered several meaningful new products and enhancements across our sportsbook and casino. Just last week, we became the first operator in history to sorry, the industry, to introduce same-game combos for esports. This is our own proprietary version of same-game parlays, wrapped in Rivalry's signature creative touch to further elevate the on-site entertainment experience. Not only are we bringing one of the most popular bet types on the board to esports fans for the first time, but we expect this offer to also increase our overall sportsbook margins, an important initiative to be touched on shortly. We also launched our mobile app in Ontario, allowing residents to access and bet on the region's most extensive catalog of esports titles as well as traditional sports from their phones. We built on the significant expansion of our casino product suite, adding a number of additional titles, and we will have more exciting new product releases to discuss as Q3 continues to progress. On the marketing side, Rivalry's social media presence and content strategy continues to be central to engaging our digitally native target customers and grew steadily throughout the quarter. In Q2, we saw an average 25% sequential increase in followers across all our channels, and a 180% increase in engagement year over year. By all metrics, Rodley's brand engagement as measured by its social and content reach is by orders of magnitude the largest brand in the esports betting category globally, and in many cases has the most engaged social property in our markets for any betting brand period. This is a testament to not only our deep Gen Z and young millennial demographic understanding of the betting category, but the consumer product category as a whole. In May, we signed a group of Counter-Strike creators, which grew our reach across social media and live streaming platforms by an additional 2.7 million fans. Counter-Strike has been one of the top three most bet on esports on Rivalry since our launch, and generally is one of the most viewed esports titles in the world for well over a decade. We also debuted a new esports-centric show in August with one of our top partners, which has already generated more than 2 million views in just a few weeks. This media strategy further entrenches our brand around our target customers' favorite entertainment and provides us with reliable touchpoints to engage them around key esports events approaching in H2. And these are just a few of the highlights, with our marketing and creative teams delivering incredible work consistently across all our markets. Overall, we are pleased with the continual momentum in the business that we delivered through OQ2, and now we would like to provide some forward-looking guidance. On the back of the consistent year-over-year growth trends we've experienced in handle, revenue, and gross profit over the last few years, our growing customer base and consistent product enhancements, alongside the stabilization and operating expenses over the past four quarters, proving out the operating leverage of the business, has given us the confidence to introduce guidance on profitability. We are pleased to say that we expect to reach profitability in the first half of next year. On the path to getting there, we have some operational tuning to do that has been underway for some time as it relates to stabilizing sportsbook margins, which represents the majority of Rivalry's revenue base at approximately 80% of our revenue in Q2 and H123 as a whole, with the balance being casino revenue. When comparing Q2 to Q1 of this year, we only saw a relatively modest 7% sequential decline in betting handle, In the past, we've seen a bigger slowdown during the second quarter attributable to the seasonal dip in esports events during that time. That said, an increasingly diversified handle mix with casino and steadily growing base of traditional sports betting is resulting in greater monthly betting handle stabilization. This is a trend that we began to detect this quarter and something we are encouraged by. It is not to say all seasonality is gone, but the peaks and troughs are narrowing from where the business sits today in terms of geographic mix and weight and product mix and weight. As the business continues to scale geographically and product diversification increases meaningfully year over year, we will continue to watch for any further moderation of historical seasonal trends, just as we had in Q2 this year. Circling back against that 7% betting handle decline versus Q1 this year, investors will note that revenue declined from $12 million in Q1 to $8.5 million in Q2. That's a decrease of 29%, outpacing the 7% decrease in handle. Casino revenue was up marginally, so the decrease is due to the sportsbook segment. This sequential sportsbook revenue decrease contributed to a net loss expansion of the quarter. Q2 also saw, or just generally sees, our annual salary increases driving an increase in overhead, which is our largest expense, along with a few one-time expenses. These two factors expanded Q2 net loss greater than what has been expected against a sequential 7% decline in handle. The sportsbook margin challenges in Q2 is a subject we would like to spend a minute addressing. Rivalry's distinct approach in the space centered around millennials, Gen Z, and their unique entertainment preferences is one of our key business differentiators, but it also presents unique challenges regarding betting behaviors and player margins that we're only able to learn as we scale and accordingly work to address in real time. Generally, we've experienced higher margin volatility within the sports look among this demographic, which alongside a select number of low probability esports and sports outcomes in Q2 negatively impacted our revenues. It is worth noting that at consistent industry average margins, Rivalry would have been profitable in Q1 and Q2 this year against the betting handle we generated. This points to the latent profitability available to be realized at the business's current level of handle, let alone in the future as we continue to deliver growth. In the immediate term, we have been turning our operational initiatives to address normalizing and stabilizing margin and seeing early positive results. This includes an increase in higher margin product mix through the release of same-game parlays, marketing higher margin verticals to our media channels, selective posted margin increases where rivalry is below market, and beefing up our internal sportsbook operational team to provide greater real-time feedback loops to enhance those efforts. Ultimately, this is just the nature of building a business that delivers triple-digit growth on a year-over-year basis multiple years in a row as rivalry has. Intrinsic to rapid growth in any venture or field is rapid learning and an ever-expanding opportunity set on the back of that. Our sophisticated understanding of this highly coveted millennial Gen Z consumer is our biggest competitive advantage, and as the industry's traditional demographic starts aging out, we'll be an even more sought-after customer cohort. We have a significant head start on understanding and operationalizing the customer experience and success of this demographic, which has given us the proprietary ability to acquire, engage, and retain them while many of our peers cannot. Capturing this elusive customer is only possible with innovative and engaging products, some stopping marketing, and a brand steeped in internet culture around their favorite entertainment category. Most importantly, these ingredients are not easily replicated, and their benefits continue to materialize within the business and contribute toward the operating leverage we speak to so often in a number of the metrics that I provided at the start of this call. We believe our unique position and the adjustments being made to improve margin alongside continued operating expense stability will positively impact bottom-line results and allow us to reach profitability during the first half of next year. At this point, I'd like to turn the call over to our CFO, Kata, to review our financial results in greater detail.